Tai: Reduce Tensions Between U.S. and China

U.S. Trade Representative Katherine Tai spoke during a recent meeting of the National Chicken Council and discussed the relationship between the U.S. and China. She says her recent interactions with China were intended to bring down the temperature of a trading relationship that’s become heated in recent months. Tai describes the relationship between the two largest economies in the world as “a pile of dry tinder.” She also says that any potential misunderstanding between the countries is likely to spark a giant fire that could have drastic effects on both nations and the world’s economy. U.S. News Dot Com says Tai recently took part in a phone call with the Chinese Vice Premier to talk about China’s failure to live up to the Phase 1 trade agreement with the U.S reached under former President Trump. U.S. officials looked at the phone call as a test of the bilateral relationship between the nations, and Chinese officials used the call to press Tai to eliminate tariffs in place on imported goods from the Asian nation. “China has a huge market and population, and they all need to be fed,” Tai says. “China needs ag imports, and that is something we can supply.”

Reaction to the Build Back Better Bill Framework Released Last Week

Ag Secretary Tom Vilsack issued an endorsement of the framework for President Biden’s Build Back Better Act that was announced last week. Vilsack says to create millions of good-paying jobs, grow the economy, build American competitiveness, and secure the future of American children, then the U.S. must invest in the human infrastructure of the nation, which is America’s working families. “The Build Back Better framework is the largest effort in American history to combat the climate crisis while spurring economic opportunity with innovation and good jobs here at home, better positioning us to compete globally,” Vilsack says. Senate Ag Chair Debbie Stabenow says, “The bill scales up climate-smart agriculture programs that farmers, foresters, and rural businesses use to protect resources and be more energy-efficient.” National Farmers Union President Rob Larew says the agreement is a tremendous step toward addressing many of the challenges facing the nation. “Family farmers and ranchers are an essential part of the climate solution,” Larew says. “We’re pleased the framework invests in programs to help accelerate the implementation of climate-smart practices on farms and ranches and demonstrates support for biofuels.” Larew also says this effort will help to make farms more resilient in the face of extreme weather events or other natural disasters made worse by climate change.

Build Back Better Framework Contains $1 Billion for Biofuels

Growth Energy CEO Emily Skor thanks President Biden and leaders in Congress for including $1 billion in biofuels infrastructure investments in the proposed Build Back Better budget reconciliation framework. Skor says President Biden’s proposal to invest $1 billion in biofuels infrastructure is a welcome acknowledgment from this administration that access to higher blends of biofuels at the pump makes a real difference in decarbonizing transportation. “Recent research shows that a nationwide E15 standard would reduce carbon emissions by more than 17 million tons, which is the equivalent of taking almost four million cars off the road each year,” Skor says. “Investing in fuel infrastructure that allows more American drivers to fill up on low-carbon biofuel blends, like E15, is crucial to helping our nation. Achieve clean energy goals today.” Ag Secretary Tom Vilsack says rural America will benefit from meaningful investments to help pave the way in clean and renewable energy infrastructure and production and energy efficiency improvements that will foster new job and market opportunities.”

Higher Ethanol Production Could Use More Exports

After a COVID-19 slowdown in fuel demand, global energy prices have hit seven-year highs, and gasoline consumption is improving. Reuters says that means surging profit margins for ethanol producers and output levels at near-record highs. However, higher production without a corresponding increase in demand could mean growing stockpiles of the fuel. While that hasn’t been the case so far, an increase in lagging exports could bring balance to any extended output increases. Reuters says about 10 percent of all U.S. ethanol output gets exported every year, but trade has recently been a sore spot for ethanol. Shipments over the first eight months of 2021 totaled 796 million gallons, a 10 percent reduction from last year and the lowest for the period in five years. Two of the top customers for U.S. ethanol, Brazil and China, have been much less active recently. U.S. ethanol imports in Brazil grew more expensive than locally-produced ethanol because the free tariff-rate quota ended late in 2020. China was also expected to become a bigger importer of U.S. ethanol but hasn’t consistently imported larger amounts of the biofuel.

Rabobank: Challenging Outlook Ahead for Pork Producers

Hog prices around the world have dropped as a recovery in production has outpaced rebounding demand. A Rabobank report says herd growth will slow in 2022 due to dropping prices, labor shortages, and cost inflation that will put pressure on production margins. These costs will likely get passed on to consumers, which will put downward pressure on demand and consumption levels. Supply chain disruptions and tight grain stocks around the globe are raising the cost of production at the same time a growing hog supply is driving down prices. “The most severe impact is being felt in markets that were slow to recover from COVID-19 or that have struggled with trade disruption or disease,” says Christine McCracken, Senior Analyst for Animal Protein at Rabobank. Limited pricing power and higher costs are also putting pressure on hog production returns, resulting in scaled-back growth plans in many markets. Tighter global inventories of corn and soybeans, together with the recent surge in the cost of fertilizer and chemicals, are likely to increase volatility in feed markets in 2022. “African Swine Fever remains an issue in many parts of the world, with active cases in China, the Philippines, South Korea, Vietnam, and Europe,” McCracken adds.

House Ag Committee Hearing on Supply Chain Disruptions

The House Agriculture Committee will hold a hearing on supply chain issues on Wednesday, November 3. The hearing, titled “The Immediate Challenges to our Nation’s Food Supply Chain,” will address the wide-ranging supply disruptions in the U.S. food and agricultural sectors. The American Soybean Association led the effort for members of the Ag CEO Council to highlight agricultural supply chain issues to the administration. The council submitted a letter compiled by ASA staff and signed on by ASA and 16 other ag groups that was sent to the Department of Transportation, which has coordinated this effort on behalf of the White House’s Supply Chain Task Force. The correspondence outlines the most problematic areas for the ag industry, including transportation costs, labor availability, the global fertilizer market, and more. The letter says, “The supply chains that are critical for inputs and sales of goods face multiple and simultaneous challenges, leading to higher prices for inputs, lower prices for outputs, and in some cases, the inability to purchase goods or services regardless of price.” The Ag CEOs say the biggest challenges for the supply chain include labor shortages, congestion in trucking, rail freight, and the barges that haven’t recovered from Hurricane Ida shutdowns.

Monday Watch List

Markets

The first Monday in November will start with traders checking over the latest weather forecasts and pausing at 8 a.m. CDT for a possible export sale announcement. ISM's index of U.S. manufacturing is set for 9 a.m. and will be compared to overnight reports of other manufacturing indices around the world. USDA's weekly grain inspections report is due out at 10 a.m., followed by a monthly report of soybean crush in the Fats and Oils report from NASS at 2 p.m. and the Crop Progress report at 3 p.m. CDT.

Weather

A cold front that moved through much of the country over the weekend will continue to push south on Monday. Scattered showers, including some snow, over the Central Plains will become lighter as they move into the southern Midwest. Colder temperatures will be in place behind the front through much of the week, causing frosts and freezes and slowing growth on wheat.